The FCA, FOS And The Trust Problem Nobody Wants To Talk About

There is a growing trust problem around both the Financial Conduct Authority and the Financial Ombudsman Service, and while much of the debate usually, and justifiably focuses on delays, poor decisions, weak regulation, inconsistent outcomes and a general failure to act quickly enough when consumers are being harmed, there is another uncomfortable issue sitting underneath all of it.

Who are these organisations actually employing, promoting and listening to?

That question matters because institutions are shaped by the people inside them. Their instincts, assumptions, priorities, blind spots and prejudices do not appear from nowhere. They are built in, formed by professional background, career experience, personal networks and years spent looking at the world from one side of the fence rather than the other.

When you look at the publicly visible employment histories of the people within these organisations, particularly at senior and decision-making level, a very clear pattern emerges. There is no shortage of people who have come from banks, lenders, insurers, financial services firms, regulators, large institutions and similar corporate environments. What is much harder to find is meaningful evidence of people who have actually spent time working inside customer representative firms, claims management companies, claimant law firms or organisations that spend every day challenging financial institutions on behalf of ordinary consumers.

That imbalance matters.

Not because everyone who has worked in financial services is incapable of fairness, and not because everyone who has worked in consumer representation is automatically right, but because a regulator and an ombudsman service that are heavily influenced by industry-side experience will inevitably develop an industry-side instinct. That instinct may be subtle, it may be denied, and it may be dressed up in neutral language, but it inevitably shapes how complaints are viewed, how representatives are treated, how lenders are addressed, and how much sympathy is extended to firms that have caused consumer harm.

Institutional Bias Does Not Need To Be Written Down To Exist

Bias does not always arrive as a written policy or a formal instruction. It generally presents itself as culture, tone, impatience, suspicion and a quiet sense of who is considered reasonable and who is considered a nuisance.

That is the real problem.

If an organisation is filled with people whose professional lives have largely been spent around banks, lenders, insurers, regulated firms and large financial institutions, it should surprise nobody if that organisation starts to see the world through the eyes of those institutions. It instinctively leads to an understanding of their operational difficulties, their commercial pressures and their cost concerns. It instinctively gives them time, benefit of the doubt, procedural comfort and careful language.

By contrast, consumer representative firms are too often treated as the problem, even when they are the ones identifying the harm, gathering the evidence, pursuing the complaints, challenging the rejections and forcing issues into the open via litigation. Instead of being seen as part of the consumer protection ecosystem, they are too often painted as opportunists, irritants or commercial actors interfering with a system that would apparently work better without them.

That is a deeply convenient narrative for regulators and industry alike, and it allows attention to shift away from the misconduct itself and onto the people exposing it.

Representative Firms Have Done The Work Regulators Failed To Do

There is an obvious irony in the aggressive attitude shown towards consumer representative firms by both the FCA and FOS. These are the very firms that have effectively policed the financial services industry in the absence of an effective regulator.

In motor finance, PPI, irresponsible lending, hidden commissions, affordability failures, GAP insurance mis-selling and other consumer finance scandals, it has generally been consumer representatives who identified patterns, took instructions, gathered complaints, recovered evidence, pushed lenders, escalated matters, funded litigation and refused to accept the industry’s usual response that everything was fine and the market was transparent and working effectively.

The regulator rarely leads from the front. The ombudsman was doesn’t move quickly or consistently enough. Consumers, left alone, were often outgunned by firms with legal teams, compliance departments, template rejection letters and years of experience in wearing people down.

Representative firms stepped into that gap.

They did not create the scandals. They did not design unfair commission models. They did not hide affordability failings. They did not reject complaints on weak grounds. They did not build systems that profited from consumer ignorance. They responded to the harm that banks, lenders and brokers had already caused, and in doing so they exposed failures that the regulator should arguably have identified and stopped years earlier.

That is why the hostility towards them feels so revealing.

It is not just regulation. It feels like resentment.

The Embarrassment Factor

The FCA and FOS have both been embarrassed by consumer representative firms, and that should not be overlooked.

Every major complaint trend that gathers pace because consumers and their representatives refuse to give up is an uncomfortable reminder that the system failed before those complaints were made. Every successful challenge exposes not only the lender’s conduct, but also the weakness of the framework that allowed that conduct to continue. Every court case that forces a change in approach raises the same awkward question of why it took litigation, claims firms, claimant lawyers and years of pressure before consumers were taken seriously?

That is particularly true in motor finance and GAP mis-selling, where representative firms have pushed issues into places the regulator did not appear willing or able to take them quickly enough. The FCA can now talk about redress, schemes, market stability and consumer outcomes, but this only became unavoidable because others would not let the issue be buried.

For the FOS, the problem is similar. If complaint volumes rise because representatives are identifying systemic problems, the answer should not be to treat representatives as the disease. The answer should be to ask why the underlying misconduct is so widespread, why consumers needed help to complain effectively, and why firms were able to reject so many complaints before pressure built to a level that could no longer be ignored.

Instead, we repeatedly see the same pattern. The financial firm is treated as a regulated business facing complexity. The representative firm is treated as a commercial threat. The consumer is placed somewhere in the middle, often expected to navigate a process that has been made slower, more technical and more hostile by the very institutions that claim to exist for their protection.

A System Too Comfortable With The Industry It Regulates

The FCA’s role is to regulate financial services. The FOS’ role is to resolve disputes between consumers and financial businesses. Neither organisation is supposed to be an extension of the banking sector, the lending sector or the insurance sector.

Yet when the career pipeline into senior regulatory and ombudsman roles leans almost exclusively towards people with backgrounds in financial services, large institutions, regulators and similar environments, it creates a perception problem that cannot simply be brushed aside.

Consumers are entitled to ask whether the system is too comfortable with the industry it is meant to challenge.

They are entitled to ask whether there is enough lived professional understanding of how consumers are treated when they try to complain.

They are entitled to ask whether there is enough appreciation of the work done by representatives who deal every day with obstruction, delay, poor disclosure, template responses and firms that only change their position when forced.

They are entitled to ask why the publicly visible career routes into these organisations do not appear to show the same appetite for claimant-side consumer representation experience as they do for financial services, regulatory or corporate experience.

This is not a small point. If the FCA and FOS want consumers to trust them, they must look and behave like organisations that understand consumers, not just the firms consumers complain about.

The Suspicion Towards CMCs And Law Firms Is Baked In

There is undoubtedly a baked-in suspicion towards CMCs, claimant law firms and other consumer representatives, and it is difficult not to connect that suspicion with the professional culture inside the organisations judging them.

When people have spent years inside institutions that see claims firms as a cost, a disruption, a reputational threat or a source of operational pressure, it is hardly surprising if some of that thinking follows them into regulatory or ombudsman roles. Even where individuals act in good faith, the institutional mood can still become one of irritation towards representatives rather than curiosity about why their involvement became necessary in the first place.

This is where the language used about representatives becomes so important. Claims firms are often discussed in terms of fees, marketing, complaint volumes, data gathering and commercial motivation. Financial firms, by contrast, are more often discussed in terms of complexity, burden, proportionality, operational readiness and market stability.

That contrast says a great deal.

Of course representative firms are commercial businesses. So are lenders. So are banks. So are insurers. So are motor finance companies. The idea that a representative firm charging for its work is somehow morally suspect, while a lender profiting from undisclosed or unfair arrangements is simply part of a functioning market, is precisely the kind of distorted thinking that destroys public confidence.

The question is not whether representative firms have commercial interests. They do. The question is why their commercial interests seem to attract far more moral outrage than the commercial interests of the firms that caused the consumer harm.

Consumers Need Representation Because The System Is Not Balanced

The hostility towards representative firms would be easier to understand if consumers were operating in a fair, simple and genuinely accessible system, but they are not.

A consumer complaining alone is often up against a financial business with records, systems, legal support, compliance departments and carefully prepared rejection arguments. The consumer may not know what documents to request, what rules apply, what disclosure matters, what evidence is missing, what arguments have succeeded before, or when a firm’s explanation is incomplete or misleading.

That is why representation matters.

It is not a luxury, but often the difference between a complaint being dismissed and a complaint being properly understood.

If the FCA and FOS truly believe in consumer protection, they should recognise that responsible consumer representatives are not enemies of fairness. They are part of the mechanism that allows consumers to stand a chance against institutions with far greater resources.

Instead, the approach too often appears to be one of suspicion, restriction and criticism, as though the presence of representatives is the source of the problem rather than a symptom of the problem. Consumers turn to representatives because they do not trust the industry to deal with them fairly and, increasingly, because they do not trust the regulator or ombudsman to move quickly enough without pressure.

That is a damning position for both the FCA and FOS to find themselves in.

The Real Conflict Of Experience

There is a great deal of discussion about conflicts of interest in financial services, but far less discussion about conflicts of experience.

A conflict of experience arises when the people responsible for judging a market have overwhelmingly lived, worked and progressed through one side of that market. It does not mean they are corrupt. It does not mean they are dishonest. It does not mean they are incapable of making fair decisions. What it does mean is that their default assumptions may not be neutral.

If your professional background teaches you to see complaint volumes as a burden, redress as a cost, representatives as a nuisance and mass claims as a risk to market stability, those assumptions do not disappear simply because you move into a regulatory or ombudsman role.

Likewise, if an organisation lacks people with genuine claimant-side experience, it may fail to understand why representatives push so hard, why consumers do not trust lenders, why template rejections are so damaging, why disclosure battles matter, and why legal challenges are sometimes necessary to force fairness into a system that would otherwise protect itself.

This is why staffing matters.

Not as a personal criticism of individual employees, but as a structural concern about the culture and instincts of institutions that wield enormous power over consumer outcomes.

The FCA And FOS Need To Widen Their Lens

If the FCA and FOS want to rebuild trust, they need to do more than publish statements about fairness, independence and consumer protection. They need to look seriously at who they recruit, who they promote, who they listen to, and whose experience is treated as valuable.

There should be far greater representation from claimant-side consumer law, responsible claims management, debt advice, consumer advocacy and organisations that have spent years dealing with the realities of financial harm from the consumer’s side. Not token appointments or occasional consultation. Not carefully managed stakeholder meetings where consumer representatives are heard and then ignored. Real experience, built into the decision-making culture.

The current perception is damaging because it suggests that the system is more comfortable with the industry than with those who challenge it. That perception will not be fixed by attacking claims firms, increasing procedural hurdles or making it harder for consumers to obtain help. It will only be fixed when consumers can see that the regulator and ombudsman understand the imbalance of power that exists in the real world, not just the version described in policy documents.

Trust Is Earned, Not Assumed

The FCA and FOS cannot simply demand public trust. They have to earn it.

They have to earn it by acting quickly when harm is identified. They have to earn it by holding financial firms to account in a way that actually deters misconduct. They have to earn it by treating consumer representatives fairly rather than as an inconvenience. They have to earn it by recognising that many of the scandals now dominating the headlines were not exposed because the system worked well, but because consumers and their representatives refused to go away.

Most importantly, they have to earn it by confronting the uncomfortable possibility that their own cultures may be part of the problem.

A regulator and an ombudsman service built too heavily around financial sector experience will always risk seeing the world through the eyes of the firms they are meant to challenge. That risk becomes even greater when there appears to be little comparable experience from the side of those who actually represent consumers against those firms.

That is why this issue matters.

It goes to the heart of confidence in the system.

If consumers look at the FCA and FOS and see organisations filled with people who understand banks, lenders and financial institutions far better than they understand claimant representatives and the consumers they serve, then distrust is not only predictable. It is justified.

Until that changes, the suspicion will remain that both organisations are instinctively tougher on those exposing financial misconduct than they are on those responsible for it.

And after everything consumers have seen in motor finance, PPI, irresponsible lending and other scandals, that is a suspicion the FCA and FOS have done very little to dispel.